Two people were treated for "minor exposure" after the sarin incident but no serious injuries were reported. Soldiers transporting the shell for inspection suffered symptoms consistent with low-level chemical exposure, which is what led to the discovery, a U.S. official told Fox News.

"The Iraqi Survey Group confirmed today that a 155-millimeter artillery round containing sarin nerve agent had been found," Brig. Gen. Mark Kimmitt (search), the chief military spokesman in Iraq, told reporters in Baghdad. "The round had been rigged as an IED (improvised explosive device) which was discovered by a U.S. force convoy."

The round detonated before it would be rendered inoperable, Kimmitt said, which caused a "very small dispersal of agent."

However, Defense Secretary Donald H. Rumsfeld said the results were from a field test, which can be imperfect, and said more analysis was needed. If confirmed, it would be the first finding of a banned weapon upon which the United States based its case for war.

A senior Bush administration official told Fox News that the sarin gas shell is the second chemical weapon discovered recently.

Two weeks ago, U.S. military units discovered mustard gas that was used as part of an IED. Tests conducted by the Iraqi Survey Group (search) — a U.S. organization searching for weapons of mass destruction — and others concluded the mustard gas was "stored improperly," which made the gas "ineffective."

They believe the mustard gas shell may have been one of 550 projectiles for which former Iraqi President Saddam Hussein failed to account when he made his weapons declaration shortly before Operation Iraqi Freedom began last year. Iraq also failed to then account for 450 aerial bombs with mustard gas. That, combined with the shells, totaled about 80 tons of unaccounted for mustard gas.

It also appears some top Pentagon officials were surprised by the sarin news; they thought the matter was classified, administration officials told Fox News.

An official at the U.N. Monitoring, Verification and Inspection Commission (UNMOVIC) headquarters in New York said the commission is surprised to hear news of the mustard gas.

"If that's the case, why didn't they announce it earlier?" the official asked.

The UNMOVIC official said the group needs to know more from the Bush administration before it's possible to determine if this is "old or new stuff. It is known that Iraq used sarin during the Iraq-Iran war, however.

Kimmitt said the shell belonged to a class of ordnance that Saddam's government said was destroyed before the 1991 Gulf war (search). Experts believe both the sarin and mustard gas weapons date back to that time.

"It was a weapon that we believe was stocked from the ex-regime time and it had been thought to be an ordinary artillery shell set up to explode like an ordinary IED and basically from the detection of that and when it exploded, it indicated that it actually had some sarin in it," Kimmitt said.

The incident occurred "a couple of days ago," he added. The discovery reportedly occurred near Baghdad International Airport.

Washington officials say the significance of the find is that some chemical shells do still exist in Iraq, and it's thought that fighters there may be upping their attacks on U.S. forces by using such weapons.

The round was an old "binary-type" shell in which two chemicals held in separate sections are mixed after firing to produce sarin, Kimmitt said.

He said he believed that insurgents who rigged the artillery shell as a bomb didn't know it contained the nerve agent, and that the dispersal of the nerve agent from such a rigged device was very limited.

The shell had no markings. It appears the binary sarin agents didn't mix, which is why there weren't serious injuries from the initial explosion, a U.S. official told Fox News.

"Everybody knew Saddam had chemical weapons, the question was, where did they go. Unfortunately, everybody jumped on the offramp and said 'well, because we didn't find them, he didn't have them,'" said Fox News military analyst Lt. Gen. Tom McInerney.

"I doubt if it's the tip of the iceberg but it does confirm what we've known ... that he [Saddam] had weapons of mass destruction that he used on his own people," Sen. Charles Grassley, R-Iowa, told Fox News. "This does show that the fear we had is very real. Now whether there is much more of this we don't know, Iraq is the size of the state of California."

But there were more reasons than weapons to get rid of Saddam, he added. "We considered Saddam Hussein a threat not just because of weapons of mass destruction," Grassley said.

Iraqi Scientist: You Will Find More

Gazi George, a former Iraqi nuclear scientist under Saddam's regime, told Fox News he believes many similar weapons stockpiled by the former regime were either buried underground or transported to Syria. He noted that the airport where the device was detonated is on the way to Baghdad from the Syrian border.

George said the finding likely will be the first in a series of discoveries of such weapons.

"Saddam is the type who will not store those materials in a military warehouse. He's gonna store them either underground, or, as I said, lots of them have gone west to Syria and are being brought back with the insurgencies," George told Fox News. "It is difficult to look in areas that are not obvious to the military's eyes.

"I'm sure they're going to find more once time passes," he continued, saying one year is not enough for the survey group or the military to find the weapons.

Saddam, when he was in power, had declared that he did in fact possess mustard-gas filled artilleries but none that included sarin.

"I think what we found today, the sarin in some ways, although it's a nerve gas, it's a lucky situation sarin detonated in the way it did ... it's not as dangerous as the cocktails Saddam used to make, mixing blister" agents with other gases and substances, George said.

Officials: Discovery Is 'Significant'

U.S. officials told Fox News that the shell discovery is a "significant" event.

Artillery shells of the 155-mm size are as big as it gets when it comes to the ordnance lobbed by infantry-based artillery units. The 155 howitzer can launch high capacity shells over several miles; current models used by the United States can fire shells as far as 14 miles. One official told Fox News that a conventional 155-mm shell could hold as much as "two to five" liters of sarin, which is capable of killing thousands of people under the right conditions in highly populated areas.

The Iraqis were very capable of producing such shells in the 1980s but it's not as clear that they continued after the first Gulf War.

In 1995, Japan's Aum Shinrikyo (search) cult unleashed sarin gas in Tokyo's subways, killing 12 people and sickening thousands. In February of this year, Japanese courts convicted the cult's former leader, Shoko Asahara, and sentence him to be executed.

Developed in the mid-1930s by Nazi scientists, a single drop of sarin can cause quick, agonizing choking death. There are no known instances of the Nazis actually using the gas.

Nerve gases work by inhibiting key enzymes in the nervous system, blocking their transmission. Small exposures can be treated with antidotes, if administered quickly.

Antidotes to nerve gases similar to sarin are so effective that top poison gas researchers predict they eventually will cease to be a war threat.